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BMG Rights Management (US) LLC v. Cox Communications, Inc.
Citations: 199 F. Supp. 3d 958; 119 U.S.P.Q. 2d (BNA) 1665; 2016 U.S. Dist. LEXIS 105981; 2016 WL 4224964Docket: Civil No. 1:14-cv-1611
Court: District Court, E.D. Virginia; August 8, 2016; Federal District Court
The case examines whether a conduit internet service provider can be held liable for copyright infringement by its subscribers using BitTorrent, a peer-to-peer file-sharing network. BMG Rights Management (US) LLC seeks to hold Cox Communications, Inc. and CoxCom, LLC liable for the infringement of 1,397 musical composition copyrights committed by Cox’s internet users between February 2, 2012, and November 26, 2014. A jury found Cox not liable for vicarious infringement but liable for willful contributory infringement, awarding BMG $25 million in statutory damages. Currently, Cox is requesting judgment as a matter of law or a new trial, while BMG seeks judgment on its vicarious infringement claim and permanent injunctive relief. The Court will deny all motions and enter final judgment as per the jury's verdict. The background highlights ongoing efforts by copyright holders to combat online piracy, tracing the evolution of peer-to-peer file-sharing from Napster to BitTorrent, which remains a prominent method for copyright infringement. The process of acquiring copyrighted works via BitTorrent is described, emphasizing the role of torrent files and peer connections in facilitating file sharing. BitTorrent enables users to download segments of a single file from multiple sources simultaneously, enhancing efficiency and reducing bandwidth costs. Users can begin uploading pieces to others as soon as they download any part, allowing for simultaneous downloading and uploading. While the case at hand focuses on musical works, BitTorrent can facilitate the sharing of various file types. The service is often associated with significant copyright infringement; estimates indicate that 96.28% of unique visitors to BitTorrent portals in January 2013 sought infringing content, with 99.97% of non-pornographic files being infringing. An analysis showed that only 2.9% of the top 10,000 pieces of content on PublicBT were music, all shared without authorization. The widespread nature of this infringement complicates enforcement for rights holders, who find pursuing individual users impractical. Instead, they are increasingly targeting distributors of copying devices for secondary liability under contributory or vicarious infringement theories. As peer-to-peer sharing has evolved, rights holders have begun focusing on new types of intermediaries that facilitate infringement without directly distributing copyrighted content. Legal actions have been directed against various entities, including file-sharing services and ISPs, highlighting their potential liability in copyright infringement issues. In the mid-1990s, concerns arose regarding ISPs' potential liability for user copyright infringement, highlighted by a California district court's ruling in *Religious Technology Center v. Netcom On-Line Communications Services, Inc.*, which indicated that ISPs could face secondary liability for subscriber actions. In response, Congress enacted the Digital Millennium Copyright Act (DMCA) to balance ISPs’ interests in avoiding liability with copyright owners’ rights. The DMCA provides ISPs with four safe harbors against liability, contingent upon their compliance with certain requirements, including implementing a policy to terminate repeat infringers. Cox, as a conduit service provider for approximately 4.5 million customers, operates under an Acceptable Use Policy (AUP) that allows for account suspension or termination for copyright infringement. Cox employs an "Abuse Group" to manage violations of its AUP and has established a notification system for copyright holders via an email address ([email protected]). Cox's process requires specific information in infringement notifications and commits to removing or disabling access to infringing material upon receipt. To handle notifications, Cox utilizes the Cox Abuse Tracking System (CATS), which categorizes notifications into a graduated response system consisting of thirteen stages. Initial notices do not prompt action, while subsequent notices lead to escalating warnings and service restrictions. By the eighth notice, internet access is limited to a warning page, with further notices resulting in service suspension and mandatory technician support. After the thirteenth notice, a subscriber may face termination of service. Cox claimed a safe harbor as an affirmative defense against potential liability; however, evidence demonstrated that it had not reasonably implemented a repeat-infringer policy as required by Congress. Key issues included several unwritten features of Cox's policy, such as a daily limit of 200 notices per copyright holder, where any additional notices were disregarded. Furthermore, Cox aggregated notices from a single subscriber into one ticket daily and reset the graduated response count every six months if a subscriber did not reach termination review. Reactivated customers could quickly return to the graduated response system without acknowledgment of prior violations. Internal communications indicated a dismissive attitude towards DMCA obligations, exemplified by a former executive’s email expressing disregard for the DMCA. BMG, a music publishing entity, relies on royalty payments from the exploitation of copyrighted works and faces significant threats from BitTorrent file sharing. To combat this, BMG partnered with Rightscorp, Inc., which monitors BitTorrent for copyright infringement, records infringing peers’ IP addresses, and generates notices to the respective ISPs. These notices detail the copyright owner, work, subscriber’s IP, and include a settlement offer allowing subscribers to pay a fee (initially $20 or $30) to avoid legal liability for the infringement. This approach provided BMG with a financial incentive while enabling Rightscorp to facilitate settlement solutions. Notices were intended to inform Internet Service Providers (ISPs) about copyright infringement occurring on their networks, highlighting potential consequences for copyright violations. Revenue from these notices was meant to offset the costs of monitoring infringements and to support BMG's artists whose works were illegally shared online. BMG viewed this approach as innovative, while Cox considered it extortionate, arguing that settlement demands were premature since a mere notification couldn’t prove infringement. Cox refused to process notices with settlement language to avoid legitimizing them, informing Rightscorp of this stance. Despite Cox's request to remove the settlement language, Rightscorp did not comply and continued sending notices. Cox blacklisted Rightscorp, resulting in the automatic deletion of emails from them, meaning Cox received no notices for approximately 1.8 million notifications sent by Rightscorp on BMG’s behalf. Although Rightscorp continued to provide access to its dashboard and sent summary letters, Cox did not take action based on this information. BMG later sued Cox for vicarious and contributory infringement related to 1,397 musical compositions, seeking injunctive relief and statutory damages. After a jury trial, Cox was found liable for willful contributory infringement and was ordered to pay BMG $25 million, though it was not found liable for vicarious infringement. Cox subsequently filed a renewed motion for judgment as a matter of law, arguing that BMG did not demonstrate direct infringement, contributory liability, or willfulness. A court must uphold a verdict on a renewed motion for judgment as a matter of law if sufficient evidence supports a reasonable jury's finding in favor of the non-moving party. Conversely, if the evidence only supports the moving party's conclusion, the motion must be granted. Secondary liability for copyright infringement requires proof of direct infringement, defined as violating the copyright owner's exclusive rights. BMG alleged that Cox's internet users infringed its rights by using BitTorrent to upload and download copyrighted works. At trial, both parties provided evidence regarding BitTorrent's operation, with BMG relying heavily on Rightscorp's evidence of infringement by Cox users. Rightscorp's software identifies potential copyright infringements by searching torrent directories, downloading .torrent files, and using the BitTorrent protocol to verify downloaded files against its database. It records data from peer interactions during a process termed "handshake," including hash values, IP addresses, and the percentage of the torrent held by peers. Rightscorp generates notices of infringement based on peers offering complete copies of works, having sampled approximately 150,000 complete copies from Cox IP addresses between February and August 2014. Cox challenged the reliability of Rightscorp's system, noting the absence of version control software, which meant no complete historical code was available for relevant periods, only a partial 2013 version. Testimony from Rightscorp's developers and a later 2015 code, produced after the lawsuit, constituted the remaining evidence of Rightscorp’s operational integrity. Processes that were previously manual are now automated, but there was no documentation of the original methods. An expert for Cox found significant flaws in Rightscorp’s data, including 800 instances where it misidentified downloads of BMG works, such as mistakenly generating a notice for a Grateful Dead song that was actually an article. Additionally, Rightscorp produced 9,000 redundant download samples and sent duplicative notices during a certain period, with a notable spike of over 100,000 notices in one day around the lawsuit's filing. Cox questioned the accuracy of Rightscorp's notice generation threshold, which was claimed to be a 100% bitfield but was later changed to a 10% threshold in December 2014, right after the lawsuit commenced. Cox suggested that the lower threshold would increase the number of notices but reduce accuracy. Rightscorp's software is limited as it cannot detect data transmissions between peers and only downloads, thus failing to provide evidence of Cox’s IP addresses downloading BMG’s works. It can only identify IP addresses, not individuals, raising doubts about whether the infringing activity was performed by Cox subscribers, especially in shared or unsecured Wi-Fi environments. Cox's expert also criticized Rightscorp for not recording choke/unchoke interactions, which would confirm file sharing intentions. In response, BMG's representatives, including Rightscorp’s code developer Greg Boswell, noted that version control software was not used as their development was not collaborative. BMG's expert compared code from 2013 and 2015 and found no significant changes in core functions. Despite the noted deficiencies, she testified that Rightscorp's accuracy remained over 99% and confirmed its capability to detect infringing activities through a live test using BitTorrent, where a Cox IP address uploaded parts of a file to her. A second expert found a significant likelihood that Rightscorp's data reflected repeated actions by the same Cox users. Rightscorp employees clarified that they employed a 100% bitfield threshold throughout the relevant period, with the 10% functionality not being implemented until December 2014 due to challenges in manual operation and the rise of "lazy bitfield" tactics used by clients. BMG’s expert confirmed no indications of the 10% functionality being active before the implementation date. In relation to Cox's open Wi-Fi argument, BMG cited Cox's Acceptable Use Policy (AUP), which mandates subscribers to secure their Wi-Fi networks and holds them accountable for any data transmitted through their IP address. Testimony revealed that Cox would hold subscribers liable for activities conducted by household members using their Wi-Fi. Cox provided routers with password protection and required customers using their own routers to enable such security. Regarding BMG's claim of direct infringement, Cox contended that the evidence of peer-to-peer sharing of BMG’s works by users connected to Cox IP addresses was solely from Rightscorp, an authorized agent of BMG, making it insufficient for a distribution claim. The Court disagreed, referencing past rulings that accept investigator evidence for unauthorized copying and distribution. BMG had authorized Rightscorp as part of its copyright enforcement strategy. Consequently, the over 100,000 copies uploaded by Cox IP addresses to Rightscorp could substantiate a distribution claim. Cox argued that evidence negated claims of distribution based on Rightscorp’s lack of recording the unchoke signal, asserting that 1.8 million observations from Cox IP addresses indicating availability of BMG works were not confirmed offers to upload. However, Cox provided no evidence that choking is frequent, and trial evidence suggested otherwise. The jury learned about BitTorrent's operational scale and how swarms work, including the detection capabilities of Rightscorp software. Despite Cox's expert suggesting Rightscorp could have improved data collection, this did not diminish the evidentiary value of the observations. The jury also had corroborative evidence of substantial uploads from Cox IP addresses to evaluate against Cox's choking claim, indicating that Cox’s argument was insufficient to warrant judgment in its favor. BMG's evidence was deemed insufficient to establish that Cox's users reproduced BMG's works since it only demonstrated that users possessed those works without proving how they were acquired or that they were obtained via downloads on Cox's network. Despite this, the Court concluded that a reasonable jury could find sufficient evidence of reproduction rights violations, denying Cox's motion on that basis. Regarding contributory infringement, Cox argued BMG failed to prove its secondary liability, presenting two defenses: first, that its internet service allowed substantial noninfringing uses, which should protect it under the Supreme Court's Sony decision; and second, that BMG did not prove inducement as required by the Grokster decision. BMG countered that Cox misinterpreted the scope of Sony and Grokster, asserting that evidence of Cox’s knowledge of specific infringing activities and its material contribution to those infringements warranted liability. The Court noted that contributory copyright infringement relies on tort-law concepts and requires knowledge of infringing activity, with liability for those who induce or materially contribute to infringement. The Sony case established a precedent for distinguishing between sellers of technology and the infringement of users, while Grokster further clarified the necessity of inducement for liability. Ultimately, the Court found that BMG's argument regarding Cox's knowledge and contribution to infringement aligned with legal principles governing contributory infringement. The doctrine addresses when a distributor can be presumed to have intended for a product to be used in patent infringement, thus holding them liable. It distinguishes between distributors whose products have both lawful and unlawful uses, allowing liability only in cases of significant wrongdoing, rather than merely knowing misuse may occur. This principle supports public access to dual-use products. In the Sony case, the Supreme Court ruled that selling copying equipment does not constitute contributory infringement if the product has substantial legitimate uses. The Court clarified that the Ninth Circuit misapplied this precedent by interpreting it too broadly, suggesting that a producer could never be liable if their product is capable of lawful use, regardless of evidence showing intent to induce infringement. The Supreme Court emphasized that Sony did not eliminate other theories of secondary liability and found that the Ninth Circuit erred in granting summary judgment based on this misinterpretation. The excerpt highlights the legal complexities surrounding liability for copyright infringement, particularly in the context of distribution and knowledge of unlawful use. It critiques the Ninth Circuit's understanding of the Sony rule, emphasizing that it does not serve as a blanket immunity against liability. Under the inducement theory, a distributor can be held liable if they promote the use of a device for the purpose of infringing copyright, beyond mere encouragement. The text asserts that a defendant may be contributorily liable if their product has little legal use or if it is intended for infringing purposes. The court distinguishes between the broad protections offered by the Sony ruling and the specific claims made by BMG against Cox. While the court acknowledges the existence of numerous lawful uses for the internet, it suggests that Cox's provision of internet access alone does not constitute contributory infringement. However, BMG alleges that Cox actively ignored notices of infringement and facilitated users' infringement of BMG’s works, which surpasses mere distribution or design issues. The excerpt also references relevant case law, indicating that while products with substantial noninfringing uses are often at risk for contributory infringement lawsuits, injunctions can be applied to regulate their distribution. In Ellison v. Robertson, the Ninth Circuit allowed a contributory infringement claim against AOL, establishing that Internet Service Providers (ISPs) may be liable if they do not act after receiving adequate notice of user infringement. This case contrasts with Sony, where Sony's only interaction with users was at the point of sale. The court emphasized that Cox's ongoing relationship with its users creates a greater potential for culpability than mere distribution or design. Other cases, such as Capitol Records v. MP3tunes and Arista Records v. Usenet.com, have similarly ruled against the applicability of the Sony defense when a defendant is aware of specific infringements and maintains a continuous user relationship. Cox's argument that Sony provides complete immunity unless there is active inducement was rejected. The court clarified that adopting Cox’s interpretation would overly simplify the law, suggesting that Sony should not completely bar contributory infringement claims when a service has significant non-infringing uses. The Grokster decision reinforced that contributory liability can arise from common law principles without necessitating a finding of inducement. Ultimately, parties with neutral motives but ongoing relationships with users can be liable if they ignore infringement or do not take reasonable steps to address it. The Court allowed BMG to proceed with its claims against Cox, asserting that Cox had knowledge of copyright infringement by its users and materially contributed to that infringement. Cox disputed the evidence of knowledge presented by BMG, raising questions about the legal standard for knowledge in contributory infringement cases. The Fourth Circuit defines a contributory infringer as someone with knowledge of infringing activity, while the Ninth Circuit has established a standard of actual knowledge specifically in online contexts. Other jurisdictions may apply a broader, objective standard, suggesting liability is based on whether a party "knows or has reason to know" of the infringement. To establish contributory infringement, BMG must demonstrate that Cox had at least constructive knowledge of specific infringing activities that it failed to address. The knowledge standard operates on a spectrum, where closer proximity to the infringing activity strengthens the inference of knowledge. If a defendant's actions are closely linked to direct infringement, knowledge may be inferred from the circumstances, while more distant actions may require proof of actual knowledge. The Court instructed the jury that BMG must show Cox "knew or should have known" about the infringing activities of its users. Willful blindness, defined as being aware of a high probability of infringement yet avoiding confirmation, can also establish knowledge for liability. Evidence presented indicated that Cox had general knowledge of infringement on its network, having received notices from copyright holders and being aware of user activity related to BitTorrent, a platform primarily associated with copyright violations. Documentation indicated that a significant portion of Cox's traffic involved infringing activity, reinforcing the claim of its knowledge in this context. Generalized knowledge of infringement on its network is insufficient for establishing legal standing. However, Cox's inaction in response to 1.8 million notices from Rightscorp indicates a deliberate choice to ignore potential infringement. Evidence suggests Cox's graduated response system was designed to limit both the number of notices processed and customer actions required. Internal communications imply a broader disregard for enforcement responsibilities rather than solely relying on settlement language as justification for not processing notices. Cox contends that it cannot be held accountable for knowledge beyond what the notices conveyed, arguing that they merely represented allegations and did not confirm infringement. The distinction between knowing of conduct versus knowing it constitutes infringement is noted. Courts have indicated that knowledge for contributory infringement can be established if a party is aware of specific infringing activities and fails to act. Cox's request for a "perfect knowledge" standard is rejected, with courts affirming that awareness of infringing activities suffices. The jury could reasonably conclude that Rightscorp identified infringing activity on Cox's network, and had Cox acted on the notices, the knowledge requirement for contributory infringement would have been satisfied. Evidence indicates that Cox intentionally disregarded infringement issues, thus having reason to know of its users' infringement of BMG’s works. Regarding material contribution, Cox argues that BMG failed to demonstrate this due to its internet service's capability for substantial non-infringing uses. However, the Court has previously dismissed Cox's reliance on the Sony defense, affirming that providing high-speed internet service materially contributes to infringement via BitTorrent, and Cox had the capacity to withhold such service upon awareness of specific infringing activities. Google significantly aids websites in distributing infringing content globally and enables users to access such materials, impacting copyright owners despite its services being available to all websites. The Court distinguishes Google's role from that of other intermediaries, such as Visa, which do not assist in locating infringing materials or facilitate their transfer. The evidence presented was deemed sufficient for a reasonable jury to hold Cox responsible for copyright infringement on its network, despite Cox's claims of attempting to protect its customers. The Court acknowledges that applying traditional contributory infringement standards to large intermediaries like Cox introduces legal uncertainties and potential consequences. Cox contests the jury’s finding of willfulness, arguing that the standard does not require evidence beyond that needed for ordinary contributory infringement. The jury was instructed that BMG needed to show Cox had knowledge of or was willfully blind to the infringement. The Court confirms that other circuits define willfulness as requiring either actual knowledge of infringing activities or reckless disregard for copyright rights. Cox failed to propose what additional evidence should be required for establishing willfulness, and the Court declines to create a new standard, affirming that the district court's approach aligned with established law. Cox was found to have sufficient evidence indicating awareness and reckless disregard for infringing activities. In seeking a new trial under Rule 59, Cox cited multiple potential errors. The standard for granting a new trial requires the district court to set aside a verdict if it is contrary to the clear weight of evidence, based on false evidence, or would result in a miscarriage of justice, even if substantial evidence exists against a directed verdict. Cox contended that the jury instructions regarding direct infringement, contributory infringement, statutory damages, the DMCA, and evidence destruction were erroneous. While trial courts have broad discretion over jury instructions, these must collectively convey the controlling law accurately. Cox specifically criticized Instruction 25 related to copyright infringement, claiming it lacked necessary statutory language. However, the court determined that Instruction 22 adequately defined copyright rights, including reproduction and distribution. Instruction 25 explained the requirements for establishing contributory or vicarious infringement, emphasizing that infringement occurs only when copyrighted works are downloaded or uploaded without authorization. Cox argued that the instructions could mislead the jury to think lawful downloads could constitute infringement, but the court found sufficient clarity in the preceding instructions. Additionally, Cox claimed the instructions failed to require the jury to find that direct infringers used Cox's service, which the court disagreed with, maintaining that the instructions were adequate. BMG must prove by a preponderance of the evidence that users of Cox’s internet service infringed its copyrights. Cox contends that the term “upload” in the jury instruction contradicts previous rulings that merely making a work available does not constitute a violation of the distribution right. However, both uploading and downloading copyrighted material are considered infringing acts, violating the copyright holder's distribution and reproduction rights, respectively. Evidence showed that most Napster users engaged in both uploading and downloading, which constituted direct infringement of BMG’s works. Although the jury instruction may not have aligned with Cox's preferences, it adhered to legal standards. Regarding contributory infringement, the Court instructed that an individual can be liable if they know or should have known about the infringing activities and materially contribute to them. BMG must demonstrate direct infringement by users, Cox’s knowledge of such infringement, and Cox's contribution to it. The Court rejected Cox's requests to include specific instructions related to Sony and Grokster, deeming them irrelevant and maintaining a correct legal framework for BMG's claims. On statutory damages, Cox criticized the Court for not including a compilation instruction, arguing that the Copyright Act allows for only one award of statutory damages per work, including compilations. The Court instructed that damages should fall between $750 and $30,000 for each copyrighted work found infringed. Cox asserted that several works BMG claimed were part of a compilation, and thus it was an error not to include the requested instruction. There is a split among circuits on how to define “one work” for statutory damages, with some adopting a functional test based on the expression's nature. An independent economic value exists for works issued separately or as a unit, as established in Gamma Audio, Video, Inc. v. Ean-Chea. The Second Circuit considers whether the copyright holder issued works together or separately, as seen in Bryant v. Media Right Prods. Inc. The Fourth Circuit, while not taking a definitive stance, suggested in Xoom Inc. v. Imageline, Inc. that a plaintiff could receive only two statutory damages awards for multiple works issued in two collections, a view supported by other courts, including Tattoo Art, Inc. v. TAT Int'l, LLC. Evidence presented at trial indicated that BMG published nine works as an album compilation but also issued them individually through various digital platforms. BMG's deputy general counsel confirmed that all works were available for individual purchase. Although there was acknowledgment that compilations count as one work for statutory damages, this was contested regarding BMG's case. Courts have previously ruled that plaintiffs may recover per-work damages, even if works were also included in compilations, as seen in Capitol Records, Inc. v. MP3tunes, LLC. The court concluded that nothing in the Copyright Act precludes separate damage recovery for works issued both individually and as part of an album. No evidence showed that BMG exclusively issued works in album form. Cox's objection regarding the court's failure to instruct the jury about the relevance of parties’ conduct in determining damages was cited from caselaw outside the circuit. Cox argues that it was erroneous for the court to exclude consideration of BMG's lack of cooperation. However, the court had instructed the jury to factor in BMG's failure to mitigate damages, allowing the jury sufficient discretion to evaluate BMG's actions. Cox also claims the court wrongly rejected its instruction on innocent infringement, asserting that without this instruction, the jury may have believed the minimum statutory damages were $750 instead of $200. The court disagreed, stating that the evidence did not support an innocence instruction and that the jury’s finding of willful infringement indicated no prejudice to Cox from this absence. Additionally, Cox challenges the willfulness instruction as misrepresentative of the law. Regarding spoliation, Cox criticizes the court's spoliation instruction and its refusal to impose harsher sanctions for BMG's failure to preserve evidence related to Rightscorp's system prior to July 2015. Magistrate Judge Anderson recognized that BMG had a duty to preserve material evidence and that evidence was intentionally destroyed, not lost accidentally. He rejected Cox's proposals for dismissal and evidence preclusion, as these would undermine BMG's claims and overlook other ways to assess Rightscorp's accuracy. Instead, Judge Anderson recommended instructing the jury on BMG's failure to preserve evidence and the implications for assessing the Rightscorp system’s operation over the relevant period. He concluded that the district judge would decide on the appropriateness and nature of any evidentiary sanctions, and neither party contested Judge Anderson’s order. Cox filed a motion to enforce Judge Anderson's order by dismissing the case, which the Court denied. The Court affirmed Judge Anderson's finding of spoliation and stated it would provide an appropriate jury instruction after trial evidence was presented. The Court allowed Cox to mention the spoliation issue in its opening statement. Ultimately, the Court issued a spoliation instruction that was less severe than Judge Anderson's recommendation, indicating the jury may consider the absence of earlier code versions but was not required to do so. Cox argues that this was an error under Federal Rule of Civil Procedure 37 and Fourth Circuit caselaw. The amended Rule 37, effective December 2, 2015, states that if electronically stored information is lost due to a party's failure to preserve it, the court can order measures to cure the prejudice, with harsher measures available if there is intent to deprive another party of the information. While Judge Anderson found intent, the court was not bound to apply the severe measures outlined under Rule 37(e)(2). The Advisory Committee Notes suggest that remedies should fit the wrong, and lesser measures should be prioritized unless they are insufficient. The Court allowed Cox to present evidence regarding the loss of information and provided jury instructions to aid in evaluating such evidence. While Cox felt stronger sanctions were necessary, the Court deemed the lesser measures adequate after considering all trial evidence. The Court disagreed with Cox's assertion that Fourth Circuit caselaw necessitated harsher sanctions, noting district courts have broad discretion in spoliation sanctions, with dismissal reserved for extreme cases. Judge Anderson's conclusion that precluding evidence equated to dismissal justified not adopting that remedy. The Court’s spoliation instruction effectively informed the jury of the spoliation, identified the missing evidence, and allowed consideration in their deliberations, fulfilling the objectives of the spoliation doctrine. Judge Anderson found that Cox failed to preserve relevant evidence in the lawsuit. Cox argued that the Court’s instruction regarding the Digital Millennium Copyright Act (DMCA) was prejudicial, although it is generally acknowledged that the DMCA is irrelevant to establishing a prima facie case of copyright infringement. The DMCA’s safe harbor provision limits remedies against parties found liable for copyright infringement, and the Court determined pre-trial that Cox was ineligible for this safe harbor, allowing the jury to assess Cox’s liability. The Court instructed that understanding the DMCA, including its safe harbor provision and the context of Cox's interactions with Rightscorp and BMG, was essential for the jury's comprehension of the case. The DMCA was referenced in multiple trial documents, making its mention largely unavoidable. Consequently, the Court provided an instruction on the DMCA, clarifying that while it was relevant to the case background, it was not a defense in this instance and must be disregarded. Cox contended the instruction was inadequate for not stating that the safe harbor provisions were optional and irrelevant to liability, but the Court found the differences in language between Cox’s proposed instruction and the actual instruction were not significant enough to warrant a new trial. The jury was told to disregard the DMCA, and the Court presumed they complied with this directive. Cox also claimed evidentiary errors regarding the admission and rejection of evidence warranted a new trial. While district courts can reconsider evidentiary rulings post-trial, only errors causing substantial harm to the moving party justify a new trial, as per Federal Rule of Civil Procedure 61. Errors deemed non-prejudicial do not necessitate a new trial. The Court addressed each of Cox's alleged errors individually. The Court granted BMG’s motion to exclude evidence regarding Rightscorp’s business practices, including a phone script allegedly used by Rightscorp agents for collecting settlement payments, which Cox argued indicated Rightscorp’s admission of file sharing primarily occurring through unsecured wireless networks. The Court deemed the script irrelevant under Rule 403, as it had minimal probative value and did not significantly augment Cox's established objections to Rightscorp. While Cox sought to highlight the prevalence of open Wi-Fi's impact on BitTorrent activity, the potential for jury confusion and unfair prejudice outweighed any benefits of introducing the script. Additionally, the Court rejected Cox's inclusion of a Rightscorp employee recording and letters from state attorneys general, ruling them irrelevant to Cox's unclean hands defense, which had already been dismissed on summary judgment. Cox's privacy counsel, Randy Cadenhead, faced limitations in his testimony, particularly regarding his views on Rightscorp's compliance with the DMCA and characterizations of Rightscorp as a "blackmail company." Although Cox contended these limitations hindered its ability to present a full narrative, the Court found that any potential errors did not significantly affect Cox's rights. Mr. Cadenhead provided testimony regarding Cox's policy against accepting notices that include settlement demands, emphasizing Cox's cooperation with rights holders and consistent rejection of such notices. Evidence presented included emails and letters detailing Cox's position, including a letter stating that settlement demands fall outside the scope of the Digital Millennium Copyright Act (DMCA) and affirming Cox's policy to only process notices compliant with the DMCA. Cadenhead highlighted that Cox's graduated response system, considered robust and effective, led to a 96% cessation of alleged infringement after five notices. Cox contended that the Court improperly limited evidence related to the Copyright Alert System (CAS) and other ISPs' practices, which could counter BMG's claims of willfulness. However, the Court ruled that such evidence was irrelevant to the trial's issues. The Court did permit general testimony about Cox's graduated response system but excluded letters from other ISPs that Cox argued would demonstrate Rightscorp's flaws and support Cadenhead's rationale for rejecting Rightscorp’s notices. A presentation from Rightscorp listing ISPs that ignore its notices included Cox and other major ISPs like Comcast and Verizon, indicating a broader industry trend. Cox was not perceived as an outlier, and Rightscorp was aware that other ISPs were not processing its notices. Rightscorp employees confirmed that they chose not to remove settlement language from their notices. Excluded letters from other ISPs contained significant legal analysis regarding the DMCA and copyright infringement but were deemed more prejudicial than probative given other evidence available to the jury. Cox contended that the exclusion of expert testimony from William Rosenblatt was improper as it denied a favorable comparison of Cox’s response process to other ISPs and the Copyright Alert System (CAS). The court allowed BMG’s expert, Dr. Terrence McGarty, to testify, which Cox argued created an unbalanced expert presentation. However, Rosenblatt's focus on DMCA safe harbor made much of his report irrelevant after summary judgment. The court found Rosenblatt lacked relevant experience, as he had never worked for an ISP or engaged with their copyright policies, leading to the exclusion of his opinions on ISP practices and the CAS. Cox also claimed that the trial included excessive references to infringement, misleading the jury to believe these referred to proven infringements. The court instructed the jury that determining infringement was a legal decision for them to make, and Cox had the opportunity to challenge BMG's references during cross-examination. The court emphasized its role in providing legal definitions during closing instructions, ensuring the jury understood the law as presented by the court. The Court determined that any potential prejudice was adequately addressed in this case. Cox challenged the admission of Rightscorp’s notices, arguing that they should have been excluded as hearsay and that a limiting instruction was necessary to clarify that the notices did not equate to infringement. The Court ruled that the notices were admissible and decided that the jury would assess their weight as evidence of infringement. The Court also imposed boundaries on the use of the notices, ensuring BMG’s expert could not claim they constituted infringement and preventing the introduction of an excessive number of notices to the jury. The admission of two industry reports was upheld despite hearsay objections, as they were compilations commonly relied upon in the field, and were presented through expert Dr. William Lehr. These reports indicated that most BitTorrent traffic involved infringing content. Cox argued that it was prejudiced by the reliance on these reports, particularly since its expert, Dr. Joseph Karaganis, was excluded from testifying about literature criticizing these reports. However, the Court noted that since Dr. Lehr could not testify about the harms of piracy, the necessity for Dr. Karaganis’s testimony was diminished, and Cox did not subsequently raise the issue again during the trial. Cox argues that the Court incorrectly admitted over thirty internal emails related to its copyright policy and handling of infringement notifications, asserting their irrelevance to BMG’s infringement claims, especially since Cox was denied a safe-harbor defense. Cox's defense claimed that if Rightscorp had omitted settlement language, BMG's notifications would have been processed normally. BMG countered that it had the right to present evidence suggesting otherwise, and the Court found the emails relevant, concluding that Cox failed to demonstrate grounds for a new trial, thus denying the motion. BMG renewed its motion for judgment as a matter of law on its vicarious infringement claim, which requires proof of both the right to supervise infringing activity and a direct financial interest in such activity. The jury found abundant evidence favoring Cox, including a flat fee structure, the adverse impact of infringement on Cox’s licensed content sales, and testimony indicating that subscriber decisions were not primarily based on the ability to infringe. BMG's evidence, particularly a survey claiming a percentage of subscribers used Cox for file-sharing, was effectively challenged by Cox, including the survey's methodology and implications. The jury had sufficient grounds to discount BMG's claims about Cox's financial interest in infringement. BMG also sought a permanent injunction for willful contributory infringement, but the Court sided with Cox, determining that BMG did not meet the burden of demonstrating irreparable injury necessary for such an injunction. Remedies at law, such as monetary damages, are deemed inadequate for compensating the injury in question. A balance of hardships indicates that equitable relief, specifically a permanent injunction, is justified and would not harm the public interest. An injunction is recognized as an extraordinary remedy and does not automatically follow a copyright infringement ruling; even if a plaintiff meets the necessary criteria, the court retains equitable discretion in granting it. BMG's request for an injunction was based on a false assertion that Cox continued to ignore significant copyright infringement detected by Rightscorp on its network after a jury verdict. BMG claimed that ongoing infringement inflicted irreparable harm, citing a lack of response from Cox to Rightscorp's notifications. The document emphasized that continued infringement, even after a substantial jury verdict against Cox, exemplifies irreparable injury, particularly against a secondary infringer who has demonstrated willful misconduct. Despite Cox's notice to BMG indicating that Rightscorp was no longer blacklisted, BMG's counsel later admitted that Rightscorp had temporarily stopped sending copyright infringement notices. BMG acknowledged this error but maintained that it did not diminish the claim of irreparable harm. The complexities surrounding Rightscorp's role in the injunction process raised concerns regarding the adequacy of BMG's proposed injunction, highlighting difficulties in its implementation. Cox is to be prohibited from knowingly contributing to the unauthorized activities involving musical compositions owned or controlled by BMG under the U.S. Copyright Act. This injunction is criticized for lacking specificity, failing to meet the requirements of Rule 65(d) which mandates clear terms and detailed descriptions of the restrained actions. The injunction resembles a vague directive previously deemed invalid by the Fourth Circuit. The court emphasizes that specificity in injunction wording is crucial to avoid confusion and potential contempt citations. The only specified action required of Cox is to notify subscribers of certain information and inform BMG about the identity of a subscriber linked to a specified IP address and the actions taken to address infringement. However, the terms "prevent" and "limit" are not clearly defined, leading to ambiguity about what actions Cox is required to take. The distinction between these terms raises further questions about the extent of Cox's obligations and whether it implies terminating subscribers or merely imposing restrictions. Cox raises several critical questions regarding the implications and requirements of the proposed injunction related to copyright infringement. Key inquiries include whether Cox must suspend or terminate accused infringers upon receiving one or multiple notices, the definition of a "repeat" infringer, and the circumstances warranting termination. Additionally, it questions the permissibility of pre-termination warnings, the opportunity for account holders to respond to allegations, and the existence of a process to adjudicate disputes over accusations. Cox also seeks clarification on whether it can implement a counter-notice system similar to the DMCA and how to handle cases of potential malware or unauthorized access. The response asserts that the injunction is vague, failing to provide clear guidance on what constitutes prohibited conduct, thereby not adhering to the standards set by relevant case law. It emphasizes that while the injunction aims to give Cox flexibility, legal precedent favors certainty in such orders. BMG argues that Cox should not evade compliance due to perceived difficulties, yet the Court acknowledges that the injunction, in its current form, does not meet the clarity required by Rule 65. Although BMG cites other cases involving similar injunctions against peer-to-peer sharing, these do not adequately consider Cox's unique role as an intermediary. The distinctions between Cox and entities like Napster and Lime Wire highlight the need for a more tailored approach to the injunction. StreamCast, a software provider, can reduce its software's infringing capabilities while maintaining its non-infringing functionality by implementing measures such as public filter distribution and encouraging user upgrades. In cases involving torrent operators like Fung, courts can tailor injunctions based on the availability of copyrighted works on their sites. For individual BitTorrent users, courts typically enjoin internet use for downloading copyrighted materials but allow access to other online activities. The necessity of carefully crafted injunctions is emphasized to focus solely on illegal activities while preserving legal uses. BMG proposed an injunction that requires Cox to disclose the identities of subscribers identified for infringement, justifying this with a need for transparency to monitor Cox's responses. However, the broad request for personal subscriber information raises concerns, particularly regarding data privacy and potential misuse by third parties like Rightscorp. The court noted that BMG must substantiate its case for permanent injunctive relief, which appears unlikely given that the burden of compliance on Cox is significant. BMG claims Cox can easily manage infringing subscribers using its tools, yet there is inconsistency in these assertions. The court suggests that Cox might need to enforce stricter measures on subscribers, such as requiring the removal of BitTorrent software to maintain network access. Minimal testimony was presented regarding deep packet inspection as a viable solution within the injunction context. BMG delayed bringing the lawsuit for years, and while the Court acknowledges the harm caused by copyright infringement on BitTorrent, BMG failed to demonstrate that the status quo it seeks to maintain outweighs the burden on Cox. The use of the term “willful” in BMG's arguments does not alter this balance, as injunctions are not meant to be punitive. BMG also could not prove that an injunction could be crafted without harming the public interest. The requested relief could have significant implications beyond the parties involved, potentially infringing on privacy and internet access. Unlike previous cases cited by BMG, where injunctions were tailored to balance interests, BMG did not show how such a balance could be achieved here. Given these uncertainties and the competing interests at stake, injunctive relief was deemed inappropriate. The Court denied Cox’s motion for judgment or a new trial, as well as BMG’s motions for judgment and a permanent injunction. Additionally, the excerpt explains that a hash value serves as a digital fingerprint for files, highlighting the challenges the music industry faced in pursuing individual infringement cases, which proved ineffective and complex due to legal precedents limiting the applicability of the DMCA’s subpoena provisions. Title II of the DMCA, known as the Online Copyright Infringement Liability Limitation Act, establishes the liability framework for Internet Service Providers (ISPs). Cox, an ISP, does not create or distribute peer-to-peer software, host torrent indexing sites, or store infringing content on its servers, thus lacking the capability to remove infringing content. Traffic analysis performed by Cox can indicate the volume of BitTorrent usage but does not reveal specific data transfers. Users, not Cox, initiate the transfer of copyrighted material. Cox has a notification policy for rights holders to report infringement, yet it is not required to implement the DMCA’s notice and takedown provisions since it qualifies as a conduit service provider, which inherently cannot remove specific infringing content. ISPs must, however, maintain a repeat-infringer policy to retain safe harbor protection. There is ongoing debate regarding the economic impact of illegal file sharing on the music industry, with estimates of losses reaching billions of dollars, although quantifying the exact effects remains challenging. Rightscorp tracks IP addresses to identify ISPs and maintains logs to associate subscribers with specific IP addresses. Although Rightscorp sent millions of infringement notices to Cox, only a subset of 1.8 million was presented at trial by BMG. Anomalies in the notices, such as identifying a single IP address as infringing multiple times in a short span, were noted. The Acceptable Use Policy highlights that users are responsible for the misuse of their accounts, whether intentional or inadvertent. You are responsible for the security of any device connected to the Service and any data on it, as well as enabling the security of any wireless networks connected to the Service. Unsecured or ‘open’ wireless networks associated with the Cox network are prohibited. Cox is authorized to detect unsecured networks and will notify you if such a network is being used, prompting you to enable security on your Wi-Fi device. You are also accountable for any information transmitted from your IP address. The legal context involves differing interpretations of the Sony case between the Ninth and Seventh Circuits regarding liability for copyright infringement. The Ninth Circuit requires a higher showing of knowledge for establishing liability, while the Seventh Circuit has a different stance. In the Grokster case, it was noted that even if a defendant ceased operations, users could still share files uninterrupted, complicating the liability determination. The distinction from Sony is that merely distributing a product does not incur liability unless there is knowledge of infringement and ongoing assistance being provided. BMG, the plaintiff, did not pursue an inducement claim against Cox, which limits their potential victory. BMG's late assertion of inducement evidence was deemed insufficient. Justice Ginsburg’s concurrence in Grokster highlighted that liability can arise from actively encouraging infringement or from distributing a product primarily used for infringement, particularly if it lacks substantial lawful uses. The Ninth Circuit has interpreted this to encompass both inducement and material contribution as consistent criteria for contributory liability. Cox challenged BMG's approach by questioning why it ignored infringement notices related to its works while addressing notices from other copyright holders. Cox claimed its graduated response policy effectively reduced infringement by 96% after five notices. In contrast, BMG's expert, Dr. McGarty, testified that Cox acted on only about 10% of the notices it received, suggesting that Cox's system was designed to avoid losing customers due to terminations and to shield them from copyright violation concerns. The text discusses the complexity of indirect liability lawsuits, which can encompass both beneficial and harmful uses of services, and acknowledges a legal issue recognized by Cox's counsel that lacks a clear solution. The definition of a "compilation" under 17 U.S.C. § 101 is provided, indicating that merely registering works together does not suffice for establishing copyright. Cox interprets Judge Anderson's order as advocating for specific jury instructions and evidentiary sanctions, but the court disagrees, asserting that the final decision rests with it. Cox argues that discussions of the DMCA during the trial prejudiced the jury, but the court believes that instructing the jury to disregard the safe harbor provision mitigated any potential bias. Cox objected to Dr. McGarty's testimony, seeking clarity on his rebuttal but ultimately did not argue for the exclusion of his testimony based on the absence of another witness. The court had previously allowed BMG's expert to testify regarding reliance on certain reports, although some information was ruled inadmissible. BMG proposed a limited injunction against Cox, claiming it would impose minimal burdens, but Cox countered that BMG's requirement for detailed customer information without limitations was overly demanding. The proposed injunction would allow Rightscorp to contact Cox's subscribers directly, bypassing the need for Cox to forward settlement notices.